Abstract
Traditionally, India has a bank-dominated financial sector. However, the non-bank financial institutions or intermediaries (NBFIs) have also coexisted. The NBFIs consist of varieties of financial institutions that cater to a wide range of financial requirements.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Since early nineties, the primary dealers have also been included. The primary dealers play an important role in both primary and secondary government security markets.
- 2.
The RNBC has as its principal business the receiving deposits under any scheme or arrangement and not being investment, asset financing or loan company. It cannot accept deposits repayable on demand.
- 3.
For instances, (i) venture capital fund/merchant banking companies/stock broking companies registered with SEBI; (ii) insurance company holding a valid Certificate of Registration from IRDA; (iii) nidhi companies as notified under Section 620 A of the Companies Act (1956); (iv) chit companies as defined in Clause (b) of Section 2 of the Chit Funds Act (1982); (v) housing finance companies regulated by National Housing Bank are exempted.
- 4.
The NBFCs are also engaged into distribution of financial products, acting as business correspondents to banks and facilitating remittances (Gandhi 2014).
- 5.
They do not incorporate institutions with agricultural operation or industrial activity or sale purchase/construction of immovable property as principal business.
- 6.
Reserve Bank of India does not allow the NBFCs to enjoy the refinance facilities and to have cheque deposits. Thus, the NBFCs are not part of the payment and settlement systems.
- 7.
The prominence of NBFCs in facilitating the transfer of funds from savers to borrowers is duly recognized because of the positive features witnessed in the economy, viz. lower transaction costs, decision-making ability, customers’ orientation and prompt services. For example, the growth of NBFCs laid the foundation for the development of the road transport sector because the NBFCs mainly provide finance for the purchase of transport vehicles. In addition, they offer finance to purchase other assets like generators, furniture, computers and consumer durables.
- 8.
The Regional Constitution Group of Asia of Financial Stability Board (FSB) in its Report on Shadow Banking in Asia (2014) adds the followings: public financial institutions, insurance companies and pension funds.
- 9.
The ripple effects of the turmoil in the western economies led to liquidity issues and redemption pressures on mutual funds, which in turn led to funding issues for NBFCs as mutual funds were unable to roll over the corporate debt papers of NBFCs. Many had to downsize their balance sheets or enter into distress sale of their loan portfolios (Gandhi 2014).
- 10.
The principal business criteria for registration allow NBFCs the freedom to conduct other activities, beyond financial activities, from their balance sheets. While there are several large entities, undertaking financial business, they do not come within the definition of the NBFC (Gandhi 2014).
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2019 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Kannan, R., Shanmugam, K., Bhaduri, S. (2019). Status and Role of NBFCs. In: Non-Banking Financial Companies Role in India's Development. India Studies in Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-13-3375-0_1
Download citation
DOI: https://doi.org/10.1007/978-981-13-3375-0_1
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-3374-3
Online ISBN: 978-981-13-3375-0
eBook Packages: Economics and FinanceEconomics and Finance (R0)